Generational Wealth

What, you ask, is Generational Wealth? And, more importantly, how do you create it? Allow me to dive into this great topic and let’s see what we can gleam from it.

What is Generational Wealth

It takes time to build generational wealth

To start, I have a throwback to one of the first posts I did: Wealth: what exactly is it? I take the time to try and separate traditional notions of wealth (money is most often associated here) with what wealth truly is: an abundance of something that enriches our lives (I have in mind family but time is also VERY important). For the sake of this post, however, I’ll be focusing primarily on those traditional notions of wealth.

According to Personal Capital, Generational Wealth is “financial assets — such as property, investments, money, or anything with a monetary value — that you pass down from one generation to the next. Intangibles like financial education, values, and habits are an equally important part of the equation.”

Let’s use this definition as the foundation and build from there.

Why is Generational Wealth important?

This should come as no surprise, but most people and families find themselves stuck in a rut; it’s the reason people follow in their parents footsteps with poor financial decisions, never realize their full potential, or even capitalize on opportunities.

Breaking the chain – and passing on wealth – can give your children an amazing leg up in the world. It can be the difference between someone working paycheck to paycheck and just barely getting by and someone who has capital to vacation, plan, and enjoy life in general. But how do we do this? How do we go about amassing – and passing down – generational wealth?

This can be done a number of ways and with the internet the opportunities have exploded. I’ve seen so many stories lately about people who had a side hustle and turned it into a money making machine – sometimes it’s coaching, or consulting, and even writing (I can hope too, you know).

Generational Wealth isn’t always about side hustles though. My wife and I and actively pursuing financial freedom via living frugal, teaching financial literacy to our children (This one is HUGE), and being intentional about saving.

Let’s look at some ways to build generational wealth from a skilled trades perspective.

Financial Literacy

Financial literacy is THE most important thing when building wealth

I’ve included this one first on the list because it is a keystone for success – without it, you will not build wealth never mind wealth you can hand down to your kids. Think about it: if you do not understand how finances work, how to intentionally save (there’s that word again), or how to build wealth you will never be successful on that front. Imagine what it looks like were you to have wealth at your fingertips and not have a measure of financial literacy. Actually, there are plenty of examples already: lottery and inheritance are two such examples. According to the New York Daily News, 70% of lottery winners are broke after 7 years!

What’s more, according to Yahoo 70% of families lose generational wealth after the first generation and 90% lose it after the second.

Read that again – and let it sink in.

Do you know why that is? It’s because those individuals lacked financial literacy! They were unprepared to deal with money – and their actions proved it.

To that end, we are foolish to start a conversation about building generational wealth without first broaching the topic of financial literacy. It IS the FIRST step in building generational wealth.

So, what does it look like? While that is a topic for a post by itself, it does have some basic tenants:

• Understand how finances work
• Comprehending how to make – and save – money
• What accounts can/should you use to save money
• How to budget (KNOW where you are spending your hard earned money)
• How to make a plan – and stick to it
• Mapping out your path to financial success

There is A LOT more to it; in fact, the above is just the tip of the iceberg. However, a 30,000 foot overview is all that is needed to impress on you, the reader, the importance of financial literacy. There can be no doubt of its importance.

Follow opportunity and not your passion

Passion vs opportunity – which one should you pursue?

This one is huge. I’ve written a post about this very thing and you can find it here. I don’t want to cannibalize my other article; rather, I want to highlight a few important items that will drive home the point (and hopefully make you want to read the full article!).

First, for every person that “followed their passion,” advised you “to never give up on your dream,” or told you that “if I can do it so can you” there are millions who weren’t successful who followed that same advice. Look, I’m not a negative person – just realistic, here. How many people out there wanted to be professional musicians? Were going to be actors/actresses and hit it bigtime? What about those who wanted to play professional sports for a living?

I could go on and on but in the end the point is made: following your passion is NOT a recipe for automatic success. A better way to ensure you can be successful is to know where opportunity is and pursue that. Even better is to pursue that opportunity – and bring your passion with you.

Second, we would do well to understand where opportunity is. This seems really simple but generations are swept into a mold instead. For decades now the youth have been told “you have to go to college to get a good job” – and numerous people follow this line of thinking without researching things themselves. Consequently, many of them end up with a degree, debt they can’t claim bankruptcy on, and have essentially postponed their launch into adulthood by 4 years. Many are worse off then when they first started.

Look, I’m not anti – college; I myself just finished up a Bachelors but I AM anti “you have to go to college to get a good job.” That simply isn’t true. To the point of this article, the opportunity in front of people is a great career in the skilled trades. There is already a shortage – born out of the whole “you have to go to college to get a good job” movement – but with the massive amount of baby boomers retiring, the shortage has exponentially grown.

There is massive amounts of opportunity in the skilled trades, and the compensation – especially when you are a union member – is stellar. I know guys who make $100,000 IN THE POCKET and their benefits are on top of that. That isn’t something to shake a stick at.

Do you want to build generational wealth for you and yours? Follow opportunity and bring your passion along for the ride.

Start a business

Starting a business is HARD but rewarding

For some, this is one of the first things that comes to mind and to be honest, I can understand it. After all, many of us spend enormous amounts of time working for someone else, making them money. It’s natural to think that we can – and should – do this for ourselves.

And you can.

BUT, it IS difficult to start, takes A LOT of time, and – this should come as no surprise – a ton of intentionality. You HAVE to be driven to make it work.

Still, it is a viable option for building generational wealth and one of the first things that comes to mind. How does that look – and how do you start a business in what we all know best?

This particular item here has so much potential that it’s honorable mention here doesn’t do it justice and I suspect I’ll write a whole series about it at some point. After all, there is A LOT of moving parts and pieces to it and a more comprehensive view is warranted. For now, let’s acknowledge it as one way to build generational wealth.

Save Money

Know where your money is instead of wondering where it went

You would think people would talk about this one a lot more but alas, it is something that is routinely glossed over. For my part, at the moment this is the way we are building generational wealth – by saving ourselves as well as saving for our kids.

So, how does this look?

For starters, understanding that OUR wealth will be THEIR wealth is paramount. Yes, we are actively saving for retirement but it is our hope that we do not spend it all and pass on wealth to our kids – generational wealth, that is. This includes any property we have as well as reserves in various accounts. Also, this includes knowing what accounts to have, save, invest in, and actively manage. (See, financial literacy is directly responsible here, too).

Second, I’ve taken the time to research what accounts are out there for our kids financial growth. These, of course, include their custodial IRAs but also the UGMA/UTMA accounts I have opened up for them. While we don’t have them, there are 529 plans some people save for educational expenses (in the pursuit of helping their children start off with less college debt – another discussion altogether).

*You can follow along with us for the year by checking out my end of the month synopsis. Click here for our 2022 month by month review*

In the end, no matter what accounts you use to save for generational wealth, it isn’t wise to dismiss any of them. Instead, we would do well to research them all and plan how to implement the most for your plan to build generational wealth. Being intentional about what you do can pay huge dividends.

Side Hustle

Side hustles can be rewarding – but they take time to get off the ground

The internet is chock full of opportunities for side hustles, especially ones that can turn into passive income. (Passive income is income that comes in on auto pilot while active income is that which your daily grind pays you for). They take different flavors, directions, and have varying potential but the whole idea of working remote, doing something on the side, or even clocking in a few hours in the evening is made possible via the internet.

Moreover, they aren’t always feasible since those of us in the skilled trades work a lot of hours. I get it. Still, this is a list of potential opportunities to build generational wealth – and legitimate side hustles are definitely an option.

I’ve seen people turn a consulting side hustle into a viable full time gig – one that paid them well into six figures. Others followed an opportunity and turned it into a successful, money making machine. I’ve even known guys to build a weekend landscaping business.

Side hustles come in all shapes and sizes and that’s a good thing: it’s like a buffet table – take what you want and leave the rest.

Real Estate Income

Real estate has been a wealth generator for a long time now

Rounding out the list here is investing in real estate. You could purchase land and pass it down, or you could buy rental properties and generate passive income. You can even get in on crowdfunding – where you can invest in real estate with others. Investopedia has a good article rating various platforms.

Having rental property is probably the most well known, here. Dave Ramsey writes about it. Business Insider also has articles about this potentially lucrative venture. The one I would point you to though, is Paula Pant – who is the architect over at Afford Anything. The premise she operates from is that “you can afford anything – just not everything.” I think that is genius. She has numerous rentals that generate passive income for her and she even offers classes on how she does it. (Creating content that increases her income from her other income? Talk about a win!)

Start Somewhere

You’re playing the long game, full of strategy, and have to start somewhere

If you are serious about building generational wealth then you have to start SOMEWHERE. For my part, I definitely recommend beginning with mapping out what you like, what you think you can do, what opportunities are out there, and clearly establish a goal. That way, you have something to shoot for. If you do not have a clear goal in mind, you are shooting in the blind. Creating one takes tenacity and intentionality but rest assured: they pay dividends down the line. If you have nothing to aim for, you’ll miss every time.

Part of the problem, especially here in America, is that we are an “instant gratification” nation: we want what we want and we want it now. Building generational wealth is a long game – it takes time to build and that takes patience. So for some reading this, perhaps you need to work on yourself before launching into trying to build generational wealth. Setting yourself up with realistic expectations, timelines, and difficulties associated with this are a huge step in the right direction.

The above isn’t comprehensive; it really is just a quick synopsis of some of the more prominent ways to build generational wealth. Hopefully you will be spurred to do some research, make a plan, and be diligent in the pursuit of it. Remember, something worth doing is worth doing well.

So get out there and build generational wealth – and when you do, let us know how you did it!